1994 (3) TMI 349 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of "Protinules" under the West Bengal Sales Tax Act, 1954 or the Bengal Finance (Sales Tax) Act, 1941.
2. Classification of "Protinules" as a drug, patent or proprietary medicine, powdered milk, or otherwise.
3. Legality of the assessment orders and imposition of interest and penalty by the Commercial Tax Officer.
4. Validity of the respondents' actions under articles 14, 19(1)(g), and 300A of the Constitution.
5. Determination of whether "Protinules" falls under specific notifications issued under section 25 of the 1954 Act.

Detailed Analysis:

1. Taxability of "Protinules" under the West Bengal Sales Tax Act, 1954 or the Bengal Finance (Sales Tax) Act, 1941:
The Tribunal had to decide whether "Protinules" is taxable under the West Bengal Sales Tax Act, 1954 (the 1954 Act) or the Bengal Finance (Sales Tax) Act, 1941 (the 1941 Act). The applicants argued that "Protinules" should be taxed under the 1954 Act as it was previously treated as a drug. The respondents contended that "Protinules" is a nourishing drink and should be taxed under the 1941 Act. The Tribunal concluded that "Protinules" should be taxed under the 1954 Act as powdered or condensed milk, as per Notification No. 886-F.T. dated May 1, 1955.

2. Classification of "Protinules" as a drug, patent or proprietary medicine, powdered milk, or otherwise:
The applicants claimed that "Protinules" is a medicinal formulation used for treating various diseases and should be classified as a drug or patent or proprietary medicine under the 1954 Act. The respondents argued that "Protinules" is a flavoured drink and not a drug. The Tribunal found that "Protinules" does not satisfy the criteria for being classified as a drug or patent or proprietary medicine. Instead, it is a food substance predominantly composed of milk protein and carbohydrates. Consequently, "Protinules" was classified as powdered or condensed milk taxable at 8% under the 1954 Act.

3. Legality of the assessment orders and imposition of interest and penalty by the Commercial Tax Officer:
The applicants contested the assessment orders and the imposition of interest and penalties by the Commercial Tax Officer, arguing that the product was incorrectly classified for tax purposes. The Tribunal found that the Commercial Tax Officer had erred in treating "Protinules" as taxable at 11% under Notification No. 1022-F.T. dated March 29, 1984. The Tribunal quashed the assessment order and directed revised assessments according to the correct classification of "Protinules" as powdered or condensed milk.

4. Validity of the respondents' actions under articles 14, 19(1)(g), and 300A of the Constitution:
The applicants argued that the respondents' actions violated articles 14, 19(1)(g), and 300A of the Constitution. The Tribunal did not find sufficient grounds to uphold these claims, focusing instead on the proper classification and taxability of "Protinules" under the relevant sales tax laws.

5. Determination of whether "Protinules" falls under specific notifications issued under section 25 of the 1954 Act:
The Tribunal examined various notifications issued under section 25 of the 1954 Act to determine the correct classification of "Protinules." It was found that "Protinules" does not fall under Notification No. 790-F.T. dated April 2, 1957, as it does not contain cocoa or chocolate and malt as major ingredients. Instead, "Protinules" falls under Notification No. 886-F.T. dated May 1, 1955, as powdered or condensed milk, satisfying the requirement of containing more than 50% powdered milk by weight.

Conclusion:
The Tribunal allowed the application, declaring that "Protinules" is taxable under the 1954 Act as powdered or condensed milk, and not as a drug, patent or proprietary medicine, or general goods under the 1941 Act. The assessment orders and penalties imposed by the Commercial Tax Officer were quashed, and directions were given for revised assessments in accordance with this judgment. The respondents were also directed to issue permits and sales tax clearance certificates accordingly.